Ghana: The Ghanaian susu scheme and key lessons for innovative financing
Susu is an informal deposits collection scheme that is common amongst Ghanaians. Literature has it that Susu was introduced to Ghana from Nigeria and was first practiced in Ghana around 1965 by a Roman Catholic priest in the Northern Region of Ghana.
Susu as an indigenous deposit mobilizing scheme has contributed to instilling the act of thrift amongst many actors in the informal sector. This mode of deposit mobilization has thrived in places where most formal banks dare to go. The individuals involved in the collection of Susu are often referred to as Susu collectors. Although the scheme was formally more identifiable with people living in the rural areas, today the Susu scheme is very much popular and can be found almost everywhere in Ghana even within the major cities where there are a number of several traditional banks and other financial institutions.
The Susu collector’s role within the context of financial development in Ghana cannot be overlooked. The Susu concept has existed before the establishment of most of the pro poor financial institutions. For instance the rural banking concept in Ghana started around 1976,11 years after the first Susu scheme was practiced. Susu collection is as well older than any form of the microfinance institutions we have in present day Ghana. However they have been one of the few pro poor financial schemes that is still going through re-tooling to turn it into a very effective indigenous poverty alleviation tool to help in the fight against poverty.
With the expansion of the money economy, these informal financial institutions (IFIs) have not lost their vigor. Quite to the contrary, they have multiplied, both in numbers and diversity (Barclays 2005). The Susu system seems to have proven to be a dependable and cost effective mechanism of emphasizing state participation and encouragement of the domestic indigenous sector.
The Ghanaian banking sector has seen tremendous growth in terms of the number and type of the financial institutions available to assist towards deepening financial access. By the end of 2011 there were a total of 25 universal banks, 19 Savings and loans companies, 131 rural and community banks and a number of microfinance companies including Credit Unions all across the length and breadth of Ghana. Inspite of this, a recent report by the World Bank indicates that only 30% of Ghanaians have bank accounts. This finding therefore gives the clue that the number of bank branches in Ghana has not translated to increasing outreach, a condition that may be attributed to several reasons including the delivery mechanisms of the traditional banks something that the traditional Susu collectors have as the reason behind their successful existence over all these years
How susu operates
Susu can be described as one of the most ancient traditional banking systems found in Africa. It has been used over the years as a medium for fund mobilization and ensuring the safety of the deposits of savers within the informal sector. Susu has remained an informal financial instrument use for the daily deposit mobilizations or collections by people known as Susu collectors. The Susu collector operates by visiting clients and potential clients to collect their savings on daily basis for investment and safe keeping. Most clients in history only used the Susu for building assets through savings and not for the purpose of securing loans. In recent times, however, some susu operators provide loans to their clients in order to ensure client loyalty in the phase of competitions and also to meet the changing needs of the Susu clients.
In order to keep accurate records each customer or client of the Susu collector is given a card for the recording of the daily savings made by each client. The Susu collector on the other hand also keeps a contra card that has the name and picture of the said client. The collector at all times ensures that both cards contain the same transactions and are used by each party to solve any discrepancy that may arise during the period of the contract.
Most Susu schemes are operated on monthly basis with savings cycle pegged to a month after which a client can withdrawal his or her total savings and take the decision to continue or discontinue with the Susu collector. Clients in most cases agree to take their deposits after the end of a cycle which is mostly one month and also made up of 30 days. In order to make the transaction simple for both parties, client are required to do their daily payment in equal amounts. The operator of the Susu scheme charges a day amount saved out of the total number of days saved as his operating charges. The interesting thing is that the traditional Susu products mostly do not pay any interest on the clients’ savings.
Importance of the Susu Collector
In Ghana, the history of the growth and contribution of the microfinance sector cannot be written without making reference to the role and contribution of Susu. The Susu schemes are the nucleus of the present day microfinance industry in Ghana. They provide means by which individuals without formal financial services can be assured of the safety of their funds. Currently there are 1,462 Susu collectors registered with the Ghana Co-operative Susu Collector Association (GCSCA) and have still indentified over 4,000 Susu collectors who are yet not registered with the Association.
For a lot more people, it is quite difficult to understand what motivates people to hand over their savings to other individuals who do not pay them any interest on their savings but rather take a fee for keeping their monies. This phenomenon is directly the opposite of what happens in the formal financial sector where financial institutions pay interest on depositors’ savings. Many innovative financial observers are yet to understand why the Susu scheme have rather registered growth to the extent that many of the MFIs today have adopted Susu as a deposit moblising product to reach their clients. In recent times some insurance companies have also modeled premium payment by their clients within the informal sector around the Susu scheme to reach their clients. The Barclay’s Bank Ghana and Susu collector’s partnership in 2008 is also an additional recognition for the informal practice that has existed and contributed to deepening the financial frontiers for most low income earners.
What made Susu worked
There should be something that has sustained the scheme even in the era of financial sector growth in addition to the increasing complexity of the informal clients. Trusting the Susu collector is one of the main ingredients that have sustained the activities of Susu collectors. Susu clients tend to trust the Susu collectors to safely keep their deposits. Although the aspect of trust has been challenged by some recent activities where some collectors sometimes abscond with client’s deposits, it has not entirely affected the number of clients who are using the services of the Susu providers.
The nature of the economic activities of most of the Susu clients is such that they are the only key person managing their enterprises. In view of that, they mostly do not have the leisure of making time to go to the bank to transact any financial business. Most informal clients have a need for convenient banking and the Susu collectors have the their product tailored to solve the needs of these clients. Client of Susu schemes have the laxity of having to undertake the withdrawal of their savings from their work location by the Susu collector sending their amounts to the clients during the collector’s daily rounds. The truth is that this kind of service in the formal financial sector is something most traditional banks will only do for their prestige customers.
For the informal clients, the understanding and acceptance they receive from the Susu collector is what keeps them glued to the Susu scheme. The clients remain loyal because they feel accepted by the Susu provider. The Susu collector in most cases lives in the same communities with their clients and, therefore, tends to understand the value systems of their clients and this include the cultural mannerisms of the clients. The appearance, workout fit and the medium of expression of the Susu collector also makes it comfortable for the clients in dealing with the Susu collector. Literature reviews have proven that the way and manner bank officers dress and even decorate their plush offices somehow can scare most informal clients to cultivating relationship with the traditional banks.
Microfinance clients or informal clients have low or no literacy skills making it difficult to understand or read or fill the account opening or loan forms provided by most traditional banks. The transaction between the Susu collector and his clients are so simple that even without referring to their deposits cards most customers can establish their savings balance with the Susu collector because of the fact that savings are done in equal amount and on daily basis. Additionally, the transaction between them is mostly without much paper works. In most cases the only binding document is the card or savings booklets held by each party to serve as source of verification in the event of any doubt.
Successful Susu collectors have been seen to demonstrate friendliness towards their clients and even potential clients. The Susu scheme has demonstrated very excellent client relationship and has generated into client loyalty the reason why the Susu schemes have remained stronger even in the era of financial sector boost in Ghana.
With the formalization of microfinance sector in Ghana , the principle that have preserved an indigenous act of “savings’(SUSU) can be modeled by microfinance institutions seeking to improve outreach ,impact and sustainability of their operations. The Susu scheme has the client at the center of their operations and their operations are highly determined by the needs and demands of the Susu clients. If financial services meant for the low income are to effectively reached them for the purpose of improving their livelihoods, there will be the need for such financial institutions (whether downscaling bank or a microfinance institution) to create mechanisms to suit the lifestyles of the core clients rather than the institutions trying to get their clients to adopt to their systems. This is what the Susu scheme in Ghana have done so well.
By Roderick Okoampah Ayeh
Microfinance Technical Officer
ARB APEX BANK